Constitutional Background
to the Social Security Act of 1935
by Eduard A. Lopez *
When Franklin D. Roosevelt assumed the
presidency in 1933. he introduced many New Deal
initiatives to remedy the severe economic problems
of the Nation. The Social Security Act contained
provisions to help those persons most affected by
the Great Depression-a national old-age insurance
program for the elderly and a system of nationally
*Office of the Legislative and Regulatory Policy, Social Security
Administration.
uniform State unemployment programs for those
without jobs. Although the Act was passed by overwhelming majorities in both Houses of Congress,
there was concern that the Supreme Court would
declare the programs unconstitutional. This article
discusses the social security cases and the issues
that preceded the Court’s decision to uphold those
provisions. It gives an overview of the constitutional background to the Social Security Act of
1935.
Social Security Bulletin, January 1987/Vol. 50, No. 1
5
Introduction
On August 14, 1935, President Franklin D. Roosevelt
signed into law the Social Security Act of 1935.1 The
Act addressed the grave economic circumstances of the
Nation’s elderly and unemployed workers by establishing
a national old-age insurance program and by making
it easier for States to establish their own unemployment
compensation programs.?
Before enactment of the legislation, there had been
considerable doubt in the Roosevelt administration
and in Congress about whether the Supreme Court would
uphold such expansive Federal social regulation. Generally. the Court had for several decades subscribed to
a view of constitutional federalism that involved a very
narrow reading of the powers of Congress under the
Constitution so that Federal legislation would not interfere
with areas of regulation held to be the exclusive province
of States. Under this view of federalism, the Supreme
Court had invalidated the early attempts of the Congress
at economic and social regulation in the late 19th and
early 20th centuries,3 and many feared that the Supreme
Court would handle the major New Deal initiatives,
including the Social Security Act, in the same manner.
The early signs were not encouraging. From 1935
to 1937, the Supreme Court invalidated a number of President Roosevelt’s legislative programs, finding that
the enactment of these programs exceeded Congress’
limited powers and invaded the rights of States.” As
a result, doubt about the constitutionality of the Social
Security Act had turned to pessimism by early 1937,
when the Supreme Court was scheduled to decide
the question.
But in the spring of 1937, acceding perhaps to the
sentiment exemplified by President Roosevelt’s Courtpacking plan,5 the Court changed course in a liberalization
‘Pub. L. No. 74-271, 49 Stat. 620, currently codified, as amended,
at 42 USC 301-1397 (1982 & Supp. III).
?The Act contained other measures aImed at mitigating economic
hardship, including grants-in-aid for old-age assistance, aid to the blind,
and aid to dependent children. This article focuses on the old-age insurance and unemployment compensation provisions of the Act because
these are the programs that faced serious constitutional obstacles.
For a discussion of the old-age assistance and aid to dependent children
provisions of the 193.5Act, and subsequent amendments, see, respectively, Herman F. Grundmann, “Adult Assistance Programs Under the
Social Security Act,” and Jo Anne B. Ross, “Fifty Years of Service
to Children and Their Families, ” in Social Security Bulletin, October
1985. For a thorough discussion of all the provisions of the 1935 Act,
and their origins, see Edwin E. Witte, The Development of the Social
Security Act, The University of Wisconsin Press, 1962.
‘See, for example, Kidd v. Pearson, 128 U.S. 1 (1888); United
States v. E.C. Knight Co., 156 U.S. 1 (1895); Adair v. United States,
208 U.S. 161 (1908); and Hammer v. Dagenhart, 247 U.S. 251 (1918).
?Railroad Retirement Board v. Alton Railroad Co., 295 U S
330 (1935) (Railroad Retirement Act of 1934); Schechter Poultry Corp.
v. United States, 295 U.S. 495 (1935) (National Industrial Recovery
Act of 1933); Carter v. Carter Coal Co., 298 U.S. 238 (1936) (Bituminous Coal Conservation Act of 1935); and United States v. Butler,
297 U.S. 1 (1936) (Agricultural Adjustment Act of 1933).
%ee Robert Jackson, The Struggle for Judicial Supremacy: A
Study of a Crisis in American Power Politics, Alfred A. Knopf, 1941,
6
of its constitutional doctrines, including its view on
the scope of Federal power.6 The Social Security Act
was a beneficiary of this judicial change of heart, as
the Court upheld both its unemployment compensation
provisions and the old-age insurance program on May
24, 1937.7
Constitutional
Federalism
One of the most fundamental issues in the history
of constitutional litigation has been defining the respective
powers of Federal and State government. Generally,
the matter is not clearly defined in the Constitution but
turns on one’s interpretation of two constitutional provisions: The 10th amendment and the supremacy clause.
The 10th amendment provides that the “powers not
delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States
respectively, or to the people.“s The provision makes
clear that the Federal Government derives its
authority from those powers delegated to it by the States,
and that its authority is limited to those powers. Under
the supremacy clause, laws enacted by Congress pursuant
to a delegated power are the supreme law of the land,
preempting any and all inconsistent State law or action.”
Historically, there have been two general views of
federalism based on differing interpretations of these two
constitutional provisions. The first is that supreme Federal
powers extend to all subjects within their natural scope,
limited only by explicit constitutional restrictions, such as
guarantees of due process and fundamental liberties.
The 10th amendment, in this view, “states but a truism
that all is retained which has not been surrendered.“‘”
Under this view, there is considerable overlap in the areas
that may be regulated by both Federal and State govemment, and in these areas the Federal Government is supreme and the States subordinate. Characteristically,
Federal powers are construed broadly by the supporters
of this view of federalism.
The second view is that the 10th amendment reserves
to States not only powers not delegated but also a sphere
of influence that may not be infringed upon by the Federal
Government. On this theory, Federal and State govempages 176196, and Robert Stem, “The Commerce Clause and the
National Economy, 1933-1946.” 59 Harv. L. Rev. 645-693 (pt. I),
883-947 (pt. 2) (1946).
‘See National Labor Relations Board v. Jones and Laughlin Steel
Corp., 301 U.S. 1 (1937); West Coast Hotel Co. v. Parrish, 300
U.S. 379 (1937): Steward Machine Co. v. Davis, 301 U.S. 548 (1937);
Helvering v. Davis, 301 U.S. 619 (1937); and Carmichael v. Southern
Coal and Coke Co., 301 U.S. 495 (1937).
Steward Machine Co. v. Davis, 301 U.S. 548 (1937) and Helvering
v. Davis, 301 U.S. 619 (1937).
xU.S. Const. amend. X.
9U.S. Const. art. VI, cl. 2 provides: “This Constitution, and the
Laws of the United States which shall be made in Pursuance thereof
shall be the supreme Law of the Land
any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.”
‘(‘United States v. Darby, 312 U.S. 100. 134 (1941).
Social Security Bulletin, January 1987/Vol. 50, No. 1
ments are coequal sovereigns, each supreme in its respective sphere. It follows that Federal powers are
interpreted narrowly, to avoid conflict with State sovereignty.
Advocates of each view participated in the constitutional
debates and have, at different times, constituted a
majority on the Supreme Court. Generally, the first
view was adopted by the early Court under Chief Justice
John Marshall and is the view taken by the Court since
the late 1930’s. The second view enjoyed the support of
a majority on the Supreme Court from the mid-19th
century to 1937.”
Constitutional Obstacles to the Social
Security Act of 1935
It was, then, against a judicial backdrop of coequalsovereign federalism that Franklin Delano Roosevelt
assumed the presidency in 1933 in the midst of the Great
Depression. The new President thus faced not only
the substantive challenge of developing swift and effective
remedies to grave national problems, but also the institutional one of avoiding Supreme Court invalidation of
Federal palliative measures.
From a constitutional perspective, the general problem
was the same for many of the President’s New Deal
initiatives: Large-scale legislative remedies had to be
formulated so as to fit within the scope of congressional
powers narrowly construed by the Court. The framers
of the Social Security Act were faced with the problem
in the context of developing two legislative programs,
a national old-age insurance program and a system of nationally uniform State unemployment compensation
programs.
Old-Age Insurance Program
Old-age insurance posed the more difficult problem.
Basically, there were two possible approaches. One
was to style the program as an enactment under Congress’
power to regulate interstate commerce,‘* since the problems addressed were economic ones. Historically, the
commerce power was by far Congress’ broadest source
of authority, though the precedent establishing this
was from the days of the early Court. 13In its coequalsovereign mood, the Court had substantially cut back
the reach of this power, finding, for example, that
the commerce power could not support child labor laws’4
or antitrust regulation of manufacturers,i5 since regulation
of these areas was the exclusive province of States.
“See Edward Corwin, “The Passing of Dual Federalism,” 36 Va.
L. Rev. 1 (1950).
12U.S. Const. art. 1, sec. 8, cl. 3 provides: “The Congress shall have
Power
To regulate Commerce with foreign Nations, and among
the several States, and with the Indian Tribes. .”
“See, for example, Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1 (1824).
14Hammer v. Dagenbart, 247 U.S. 251 (1918).
Wnited States v. E.C. Knight Co., 156 U.S. I (1895).
Prospects for the Court upholding a Federal old-age insurance program under the commerce power thus seemed
questionable at best.
The other option was to rely jointly on Congress’
taxing power and its power to spend for the general welfare.16 Under this approach, the program would have
to be crafted so as to separate distinctly the taxing and
spending provisions of the legislation. There were
two problems here. One was the precedent that appeared
to limit the use of the taxing power to raising revenue
for Government programs that were valid exercises
of other delegated powers. I7 This seemed to preclude
using the taxing power to support a legislative program
that was not completely and independently supported
by another congressional power.
The other problem with the taxing-spending approach
was the issue of whether the spending power was
broad enough to support a Federal program that provided
cash benefits for the elderly. On this issue, there was
conflicting historical interpretation of the spending power.
It had been the position of James Madison that the power
to spend for the general welfare was only the power to appropriate money as an incident to the exercise of other
enumerated powers.is Alexander Hamilton, on the other
hand, had argued that the spending power conferred
an independent, substantive power of appropriation limited
only by the requirement that the power be exercised
so as to provide for the general welfare of the United
States.‘9 The issue had yet to be resolved by the Supreme
Court and thus was an open question.
Ultimately, the drafters of the old-age insurance
program decided to take their chances with the taxingspending option. The taxing and spending aspects of
the program were carefully separated, with the revenue
raising provisions put in title VIII of the Social
Security Bill and the benefit provisions in title II. There
were no references to contractual or earned rights to
benefits.
Under title VIII, two taxes were established: An
income tax on employees and an excise tax on employers.
Neither tax was applicable to certain categories of
employment, including agricultural labor, domestic
service, employment in State or Federal government,
and work performed by persons aged 65 or older. Both
taxes were measured as a percentage of wages payable to
the employee and were set at the same rate. For 1937
through 1939, the rate for each tax was set at 1 percent.
Thereafter, the rate was scheduled to increase l/2 of
1 percent every 3 years until reaching 3 percent. Wages
lbU.S. Const. art. I, sec. 8, cl. 1 provides: “The Congress shall have
Power to lay and collect Taxes
to pay the Debts and provide for
the common Defense and general Welfare of the United States.. .”
“Bailey v. Drexel Furniture Co., 259 U.S. 20 (1922).
‘“Joseph Story. Commentaries on the Constitution of the United
States (1833; reprint ed., DeCapo Press, 1970), vol. II, book III, sec.
972 et seq.
IYIbid.
Social Security Bulletin, January 1987/Vol. 50, No. 1
7
in excess of $3,000 per year were not taxable. The
revenues from the taxes were to be paid to the U.S.
Treasury like revenue from other Federal taxes and were
not earmarked in any way.
Title II established the Old-Age Reserve Account
and eligibility criteria for benefits. The reserve account
was created as an account of the U.S. Treasury, but
no appropriation was made to the account; the statute
merely authorized annual appropriations in the future.
The principal type of benefit created was a monthly
pension payable to a person aged 65 or older who
had worked for at least 1 day in each of at least 5 years
after December 3 1, 1936, and who had earned at least
$2,000 after that date. Benefit payments were to
begin January 1, 1942. Benefit amounts were related
to past wages according to a benefit formula that replaced
a higher percentage of lower wages than higher wages.
Benefits were not to exceed $85 per month and were payable from the Old-Age Reserve Account.
Unemployment
Compensation
Program
The unemployment compensation program posed
a very different problem. The objective of the legislation
was to induce all States to adopt nationally uniform
unemployment compensation programs. States were reluctant to establish such programs because financing them
involved imposing taxes on industry, which in turn
discouraged industry from remaining or locating in States
that imposed such taxes. The fundamental constitutional
problem was that any Federal action taken pursuant to any
congressional power that sought to make States create
programs according to Federal specifications appeared to
be the ultimate federalism violation. There was, however,
an encouraging precedent.
In 1926, Congress had enacted a Federal estate tax,
which provided that up to 80 percent of the tax would be
forgiven by the Federal Government for amounts paid
under State estate taxes. At the time, Florida had no estate
tax and many elderly, wealthy individuals were buying
property in the State and moving there. States that had estate taxes were reluctant to repeal them and had appealed
to Congress to establish national uniformity and erode
Florida’s advantage. Congress responded with the Federal
estate tax-and-offset device that was clearly designed
to encourage States to establish estate taxes so as to equalize conditions among States. Florida challenged the
scheme before the Supreme Court, arguing that the law
constituted an invasion of the sovereign rights of the
State and an effort on the part of Congress to coerce the
State into imposing an inheritance tax. But the Court
found that Florida had presented no justiciable claim and
dismissed the case, thus upholding the Federal law.20
Based on this precedent, drafters of the unemployment
LUFlorida v. Mellon, 273 U.S. 12 (1927).
compensation initiative decided to encourage States
to create unemployment compensation programs through
a similar approach. Under the scheme, a Federal
payroll tax was imposed on employers of eight or more
persons at a rate of 1 percent of total wages payable
by the employer in 1936, rising to 2 percent for 1937,
and 3 percent thereafter. An employer was entitled
to a credit of up to 90 percent of the Federal tax for any
contributions to a State unemployment fund that was
certified to the Secretary of the Treasury by the Social
Security Board as meeting Federal specifications. State
funds were to be paid immediately to the Secretary
of the Treasury to the credit of the Unemployment Trust
Fund, to be managed by the Secretary, with payments
made to State authorities upon proper requisitions. The
Federal tax and credit together, of course, enabled a
State to set up an unemployment compensation program
without fear of competition from States that chose not
to establish a program. The plan was drafted as title IX
of the Social Security Bill.
There was uncertainty in the Roosevelt administration
and in Congress as to whether the Supreme Court
would uphold the Act, especially the old-age insurance
provisions. But the President and Congress were of
the strong conviction that the measures were necessary
responses to the severe economic problems of the elderly
and unemployed. The Social Security Act of 1935 was
passed by overwhelming majorities in both Houses of Congress on August 8 and 9, 1935, and was signed into
law by President Roosevelt on August 14, 1935.
Judicial Challenge to the New Deal
In the same year that the Social Security Act became
law, the Court-in a 5-4 decision-struck down the
Railroad Retirement Act of 1934 as unconstitutional.*1
The law had established a compulsory retirement pension
plan for railroad workers pursuant to Congress’ commerce
clause authority. Justice Roberts’ majority decision
concluded that the law was “not in purpose or effect
a regulation of interstate commerce within the meaning
of the Constitution.“2Z Was it not “apparent,” he asked,
that the legislation was “really and essentially related
solely to the social welfare of the worker, and therefore
remote from any regulation of commerce as such?“23
The decision, and others that soon followed, made
it clear that the drafters of the Social Security Act had
made the right decision in opting not to rely on the
commerce power. Three weeks after the Railroad Retirement Act decision, the Court invalidated the National
Industrial Recovery Act of 1933.24The Act authorized
21Railroad Retirement Board v. Alton Railroad Co., 295 U.S.
330 (1935).
22295U.S. at 362.
23295U.S. at 368.
Wchechter Poultry Corp. v. United States, 295 U.S. 495 (1935)
Social Security Bulletin, January 1987/Vol. 50, No. I
the President to promulgate codes of fair competition
for particular trades or industries upon the request of trade
associations. The typical code contained provisions
regarding unfair trade practices, minimum wages and
prices, maximum hours, and collective bargaining.
The Court held that the wages and hours of employees
who worked only in commerce within a particular State
were not subject to Federal control.
In 1936, the commerce clause basis for New Deal
legislation failed again when the Bituminous Coal Conservation Act of 1935 was held unconstitutional.25 Under
the Act, coal producers and workers negotiated a national
code that regulated maximum hours and minimum
wages of coal workers and maximum and minimum
prices for the sale of bituminous coal. The Court determined that coal mining was of a local character and
thus was outside the scope of Congress’ power to regulate
interstate commerce.
Prospects for the Social Security Act dimmed when
the Court struck down the Agricultural Adjustment
Act of 1933, which had been enacted pursuant to Congress’ powers to tax and to spend for the general welfare.26
The Act sought to raise farm prices by curtailing agricultural production. It authorized the Secretary of Agriculture to make contracts with farmers to reduce their
productive acreage in exchange for benefit payments.
Payments were financed by a processing tax imposed on
processors of agricultural
commodities. The
Government argued that the taxing power supported
the tax and the payment provisions were a valid exercise
of Congress’ power to spend for the general welfare.
The Court summarized its position as follows:
The act invades the reserved rights of the states.
It is a statutory plan to regulate and control agricultural
production, a matter beyond the powers delegated
to the federal government. The tax, the appropriation
of the funds raised, and the direction for their disbursement, are but parts of the plan. They are but means
to an unconstitutional end.27
By the end of Roosevelt’s first term, the Court had
thus found unconstitutional several New Deal laws,
and it appeared that others, including the Social Security
Act, might well face a similar fate.
Reaction to the Court’s Threat
to the New Deal
The Supreme Court’s treatment of Roosevelt’s popular
New Deal initiatives evoked a strong sentiment against
the Court on the part of legal scholarship as well as Congress and the administration.28 Also, Roosevelt’s sweeping
Warter v. Carter Coal Co., 298 U.S. 238 (1936).
Wnited States v. Butler, 297 U.S. 1 (1936).
?‘297 U.S. at 68.
28SeeRobert Jackson, op. cit., pages 176196.
reelection victory in November 1936 suggested that
the Court’s stance on the New Deal was flying in the
face of public opinion.29 Further, the Court’s action
was sharply polarizing Members of the Court, and dissenting Justices such as Stone, Brandeis, and Cardozo
became highly critical of the majority’s decisions.30
This anti-Court sentiment was exemplified most
strongly by President Roosevelt’s infamous Court-packing
plan. Shortly after his inauguration to a second term,
Roosevelt announced his plan to reform the Supreme Court
in a message to Congress on February 5, 1937. This
was followed by a radio address on March 9, 1937, in
which the President stated:
The Court . . . has improperly set itself up as a third
House of the Congress-a superlegislature
reading
into the Constitution words and implications which
are not there, and which were never intended to
be there.
We have, therefore, reached the point as a Nation
where we must take action to save the Constitution
from the Court and the Court from itself. We must find
a way to take an appeal from the Supreme Court
to the Constitution itself. We want a Supreme Court
which will do justice under the Constitution-not
over it. In our courts we want a government of laws
and not of men.31
Under Roosevelt’s proposed bill, the President would
have been given the authority to appoint an additional
judge to any Federal court for each judge on such court
who was over age 70 and had served on the Federal
bench for at least 10 years, provided that the total number
of Justices on the Supreme Court could not exceed
15.32In 1937, six Supreme Court Justices were over
age 70 and had served on the Court for more than
10 years.33
The Senate Judiciary Committee held extensive hearings
on the bill throughout the spring of 1937.34 The
President’s proposal touched off a political debate that
quickly became a raging national controversy. 35
The Supreme Court Changes Course
In the spring of 1937, acceding perhaps to the sentiment
*%ee Joseph Alsop and Turner Catledge, The 168 Days, Doubleday,
Doran, and Co., Inc., 1938, page 10.
MSee, for example, United States v. Butler, 297 U.S. 1 (lb36),
in which the majority invalidated the Agricultural Adjustment Act of
1933. The dissenters characterized the majority’s analysis as a “tortured
construction of the Constitution
.” See 297 U.S. at 87 (Stone, J.,
joined by Brandeis and Cardozo, J.J., dissenting).
3’s. Rept. 711, 75th Cong., 1st sess. (1937), Appendix D, pages 42-43.
321bid., Appendix A, page 31,
Yjee Gerald Gunther, Cases and Materials on Constitutional Law,
11th edition, The Foundation Press, Inc., 1985, Appendix B, “Table
of Justices.”
“See S. Rept. 711, op. cit.
3SFormore detailed discussions of the Court-packing plan, see Leonard
Baker, Back to Back-The
Duel Between FDR and the Supreme
Court, MacMillan, 1967; Joseph Alsop and Turner Catledge, op. cit.;
and William Leuchtenburg, “The Origins of Franklin D. Roosevelt’s
‘Court-Packing Plan,’ ” 1966 Sup. Ct. Rev. 341.
Social Security Bulletin, January 1987iVol. 50, No. 1
9
exemplified by Roosevelt’s Court-packing plan, the
Supreme Court handed down a number of decisions that
represented marked liberalizations of its constitutional
doctrines, including its theory of federalism.36
On March 29, 1937, the Supreme Court upheld the
constitutionality of the Minimum Wage Act of the State
of Washington.37 The decision reflected a change of
position on the question of State power to regulate in
a fashion that adversely affects business interests, since
just the year before the Court had struck down an almost
identical New York law.38 Each decision was 54,
with Justice Roberts switching sides.39The 1937 decision
essentially marked a retreat from the Court’s theory
of substantive due process and did not directly imply
a change in its federalism doctrine. However, it was soon
clear that the Court was abandoning its conservative
doctrines generally in favor of more liberal ones.
On April 12, 1937, the Court upheld the National
Labor Relations Act of 1935 .@The Act created the
National Labor Relations Board and empowered it to
prevent unfair labor practices as defined in the Act.
Congress enacted the statute under its commerce clause
authority. Industry had argued that the Act was an attempt
to regulate all industry, including local industry, and
thus invaded the reserved powers of States. But the Court
expanded its definition of the Federal commerce power
to find the law constitutional. The decision was 5-4, with
Justice Roberts again casting the swing vote.
On May 24, 1937, the Court handed down its decisions
in the social security cases. The First Circuit Court
of Appeals had, in two separate cases, struck down both
the unemployment compensation and old-age insurance
provisions of the Social Security Act as unconstitutional.41
The 5-4 decision in Steward Machine Co. v. Davis42
sustained the unemployment compensation tax and
credit of title IX. Justice Cardozo’s majority opinion
concluded that the program was “not void as involving
the coercion of the States in contravention of the
Tenth Amendment or of restrictions implicit in our federal
j6For the argument that the Court’s sudden liberalization was a direct
consequence of the Court-packing plan, see Robert Jackson, op. cit.
Jackson served as Solicitor General and Attorney General in Roosevelt’s
second term. In Roosevelt’s third term, Jackson was appointed to the
Supreme Court.
37West Coast Hotel Co. v. Parrish, 300 U.S. 379 (1937).
j8Morehead v. New York ex rel. Tipaldo, 298 U.S. 587 (1936).
39JusticeRoberts’ change in position was widely interpreted as a
move to undercut political support for the Court-packing plan and became
popularly known as “the switch in time that saved the Nine.” But see
Felix Frankfurter, “Mr. Justice Roberts,” 104 U. Pa. L. Rev. 311
(1955). Frankfurter shows that a memorandum by Justice Roberts establishes that Roberts had reached his position in the Washington Minimum
Wage Act case weeks before Roosevelt announced his Court-packing
plan. (Frankfurter was appointed by Roosevelt to the Supreme Court in
1939.)
4oNational Labor Relations Board v. Jones and Laughlin Steel
Corp., 301 U.S. 1 (1937).
41Davis v. Boston and Maine R. R. Co., 89 F.2d 368 (1st Cir. 1937);
and Davis v. Edison Electric Illuminating Co., 89 F.2d 393 (1st Cir.
1937).
42301U.S. 548 (1937).
10
form of government. “43
Justice Cardozo found first that the tax was a valid
excise tax that was uniform in application and raised revenues that were not earmarked for any particular
purpose.44 He then turned to the issue of whether the
tax and credit in combination worked as weapons of coercion, destroying or impairing the autonomy of the
States. Here Justice Cardozo paused to review the reason
for the legislation:
To draw the line intelligently between duress and
inducement there is need to remind ourselves of
facts as to the problem of unemployment that are
now matters of common knowledge. . . During
the years 1929 to 1936, when the country was passing
through a cyclical depression, the number of the
unemployed mounted to unprecedented heights. Often
the average was more than 10 million; at times a
peak was attained of 16 million or more. Disaster
to the breadwinner meant disaster to dependents. Accordingly the roll of the unemployed, itself formidable
enough, was only a partial roll of the destitute or
needy. The fact developed quickly that the states were
unable to give the requisite relief. The problem had
become national in area and dimensions. There
was need of help from the nation if the people were
not to starve.45
Justice Cardozo went on to find the tax-credit combination
had the aim of equalizing conditions among the States
so as to allow the States the freedom to establish unemployment compensation programs, without fear of placing
themselves at an economic disadvantage with respect
to other States that chose not to set up a program. The
Court observed that States were free to accept or reject the
opportunity to establish their own programs according
to Federal requirements and, moreover, that States could
repeal their programs at any time. The Court concluded
that the plan was not coercive in nature but rather represented a cooperative venture between States and the Nation to provide for the general welfare.46
Justice Cardozo also delivered the Court’s opinion in
Helvering v. Davis,47 which upheld the old-age insurance
program (or rather, the taxing and spending provisions
of titles VIII and II) of the Social Security Act.
Of course, the thrust of the constitutional argument
against the old-age insurance provisions had been that titles VIII and II really operated together to form a Federal
insurance program that was beyond Congress’ authority.
Thus, the outcome of the case turned largely on whether
the Court chose to examine the two titles together or separately. Justice Cardozo analyzed them separately.
431bid., at 585.
441bid., at 578-585.
451bid., at 586.
461nanother 54 decision on the same day, the Court sustained the
Unemployment Compensation Law enacted by Alabama to fit into the
scheme of title IX of the Social Security Act. Carmichael v. Southern
Coal and Coke Co., 301 U.S. 495 (1937).
47301U.S. 619 (1937).
Social Security Bulletin, January 1987/Vol. 50, No. 1
The title VIII taxing provisions were upheld with very
little discussion. Since the taxes were applied uniformly
and the revenues were not set aside for any particular purpose, title VIII encountered no constitutional obstacles.48
Most of Justice Cardozo’s opinion was devoted to the
title II spending provisions. Here the Court adopted
Hamilton’s position on the spending power to establish
as a matter of clear precedent that Congress possesses
a substantive power of appropriation, independent of other
delegated powers, limited only by the requirement that
it be exercised for the general welfare of the Nation. Further, the Court found that the determination of what is
in the general welfare is a determination for Congress to
make, and not the courts. Judicial review of Congress’
use of the spending power was restricted to ensuring that
the congressional determination of what is in the general
welfare is not arbitrary. Justice Cardozo found that a
wealth of evidence supported Congress’ finding that
Federal old-age benefits would advance the general welfare of the country:
The hope behind this statute is to save men and women
from the rigors of the poor house as well as from the
haunting fear that such a lot awaits them when journey’s
end is near.
Congress did not improvise a judgment when it found
that the award of old age benefits would be conducive to
the general welfare. The President’s Committee on
Economic Security made an investigation and report,
aided by a research staff of Government officers and
employees, and by an Advisory Council and seven other
advisory groups. Extensive hearings followed before
the House Committee on Ways and Means, and the Senate Committee on Finance. A great mass of evidence
was brought together supporting the policy which finds
expression in the act. . More and more our population
is becoming urban and industrial instead of rural and
agricultural. The evidence is impressive that among industrial workers the younger men and women are preferred over the older. In times of retrenchment the older
are commonly the first to go, and even if retained, their
wages are likely to be lowered. The plight of men and
women at so low an age as 40 is hard, almost hopeless,
when they are driven to seek for reemployment. . . .
With the loss of savings inevitable in periods of idleness, the fate of workers over 65, when thrown out
of work, is little less than desperate.
The problem is plainly national in area and dimensions.
Moreover, laws of the separate states cannot deal with
it effectively. Congress, at least, had a basis for that belief. . . . Only a power that is national can serve the interests of a11.49
481bid., at 645.
4yIbid., at 64-644.
(Original source footnotes omitted.)
Having thus found that Congress had the authority to
spend for the general welfare of the country, and that Congress’ decision that old-age benefits would serve the general welfare was not arbitrary, the Court sustained the
spending provisions of title II. The vote was 7-2.
Summary
In June 1937, the Senate Judiciary Committee reported
unfavorably on Roosevelt’s Court-packing plan and the
bill was effectively killed.50
In the same month, Justice Van Devanter retired and
gave Roosevelt his first opportunity to make an appointment to the Supreme Court. 51Over the following 6 years,
Roosevelt made seven more appointments to the Court,
and in the years that followed the Court continued in the
direction boldly advanced in the spring of 1937.5’
A residual effect of the taxing-spending construction
of the old-age insurance provisions of the Social Security
Act of 1935 has been the Court’s continued adherence
to the view that social security programs consist of separate taxing and spending provisions and are not, constitutionally speaking, social insurance programs. The issue
has arisen in both a due process context53 and an equal
protection context.54 But it is unlikely that the decisions
reached in these contexts would have been different had
the old-age insurance program been drafted as an eamedbenefits program pursuant to the commerce power.
Of course, the Court’s decisions in the social security
cases represented a significant constitutional development
in establishing the breadth of Congress’ powers to tax
and spend for the general welfare. The decisions not only
cleared the way for other general welfare programs, but
more fundamentally provided the Federal Government
with the substantive power and institutional flexibility to
respond to the changing needs of the Nation.
s0S. Rept. 71 I, op. cit.
SrRoosevelt appointed Hugo Black to fill this vacancy.
sZTheseseven appointments were Stanley Reed, Felix Frankfurter.
William 0. Douglas, Frank Murphy, James Bymes, Robert Jackson. and
Wiley Rutledge. Roosevelt also promoted Justice Harlan Stone to Chief
Justice. Roosevelt had more appointments to the Supreme Court than any
other President to date except George Washington, who had 10. (The
original Court had only six Justices, but Washington, in two terms, had
more than one appointment to some slots.) See Gerald Gunther, op.
cit.
53Flemming v. Nestor, 363 U.S. 603 (1960).
Walifano v. Goldfarb, 430 U.S. 199 (1977). For a discussion of
the rather interesting way in which this issue divided the Court in Goldfarb, see Edmund Donovan and Eduard Lopez, “Goldfarb and Matthews: Legal Challenges to the Dependency Test for Spouse’s Benefits.”
Social Security Bulletin, December 1984. pages 23-25.
Social Security Bulletin, January 1987iVol. 50, No. 1